Facebook forays into the world of online payments?

Facebook is definitely coming into the world of online-payments. I’ve been saying this for a long time and it seems the pieces are starting to fall into place. It all started with a brilliant article by Farhad Majoo for Fast Company, aptly titled: The Great Tech Wars of 2012, in which it was envisioned that the payments war would be played out between four players: Google, Apple, Facebook and Amazon.

Not content with being just a platform to host cat photos and status updates, Facebook is readying itself to provide financial services in the form of remittances and electronic money.

The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process.

The authorisation from Ireland’s central bank to become an “e-money” institution would allow Facebook to issue units of stored monetary value that represent a claim against the company. This e-money would be valid throughout Europe via a process known as “passporting”.

Whilst many argue that Facebook’s platform is not ripe for money-transfers, I beg to differ.

Speaking to my contact within Facebook, specifically within Facebook payments group, it seems they have studied the payments framework meticulously and are confident it can be used in a safe and secure manner for the transfer of funds. Privacy pundits argue that Facebook hasn’t done enough in the space of privacy and security and adding payments onto the platform will be a fizzled launch at best. Users will not trust Facebook with their bank and/or card information. I disagree again!

I personally believe users will jump on to the platform. It has a lot to offer. Facebook payments if launched successfully and with the right formula (no one knows about the formula, everyone is tight lipped about it), would be the high-watermark for the payments industry. You’re potentially looking at one of the world’s largest bank in-the-making. Ask the millions of users who do not have access to frictionless cross-border payments (the millions of freelancers, etc.) and they will tell you how much they would love a Facebook peer-to-peer payments solution.

About Faisal Khan

Faisal Khan is a banking/payments consultant specializing in cross-border payments and is a digital money evangelist. He is the co-host of Around The Coin, a weekly podcast on Payments & Fintech with over 18,000+ listeners. Mr. Khan is a talent scout for Series A & B financing for various fintech VCs/funds. He is also a frequent contributor to popular Q&A site Quora where he has been a Top Writer 6 consecutive years.